UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 10, 2016



MDU Resources Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
1-3480
 
41-0423660
(State or other jurisdiction of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
1200 West Century Avenue
P.O. Box 5650  
Bismarck, North Dakota 58506-5650  
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code: (701) 530-1000


______________


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



1

ITEM 5.02     Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Supplemental Income Security Plan
Since 1982, MDU Resources Group, Inc. (the "Company") has offered certain key executives benefits under a defined benefit nonqualified retirement plan, referred to as the SISP, which provides participants with additional retirement income and death benefits. Effective February 11, 2016, the SISP was amended to freeze the plan to new participants and not allow further upgrades for existing participants.
Patrick L. O'Bryan Resignation
On February 17, 2016, Patrick L. O'Bryan, President and Chief Executive Officer of Fidelity Exploration & Production Company, notified the Company that he is resigning effective February 29, 2016.
Patrick L. O'Bryan 2016 Compensation
On February 10, 2016, the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of the Company granted Mr. O'Bryan a $200,000 cash award with respect to 2016, which the Board approved on February 11, 2016. Mr. O'Bryan is also eligible to receive additional payment pursuant to the sales bonus he was granted in 2015 should the sale of additional properties of the Company's exploration and production segment close prior to his termination of employment.
2016 Annual Incentive Awards
On February 10, 2016, the Committee established 2016 annual incentive award opportunities for the executive officers including some of those officers who were the named executive officers in the Company’s proxy statement for the 2015 Annual Meeting of Stockholders, and some of those who will be named executive officers in the proxy statement for the 2016 Annual Meeting of Stockholders (the “NEOs”). The Board approved the award opportunities at its meeting on February 11, 2016. The 2016 annual incentive award opportunities for the NEOs are set forth in the 2016 Annual Incentive Award Opportunity Chart, which is filed as Exhibit 10.1 and incorporated herein by reference.
The 2016 awards for David L. Goodin, President and Chief Executive Officer of the Company, David C. Barney, President and Chief Executive Officer of the construction materials and contracting segment, and Jeffrey S. Thiede, President and Chief Executive Officer of the construction services segment, were made pursuant to the Long-Term Performance-Based Incentive Plan (the “LTIP”).  The form of Annual Incentive Award Agreement under the LTIP is filed as Exhibit 10.2 hereto. The 2016 award for Doran N. Schwartz, Vice President and Chief


2


Financial Officer of the Company, was made pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan (the “EICP”).
Except as the Committee may otherwise determine, in order to be eligible to receive an annual incentive award payment under the LTIP, participants must remain employed by the Company through December 31, 2016. The Committee has full discretion to determine the extent to which goals have been achieved, the payment level, whether any final payment will be made and whether to adjust awards downward based upon individual performance. Unless otherwise determined and established in writing by the Committee within 90 days of the beginning of the performance period, no adjustment shall be made to the performance goals if the adjustment would increase the annual incentive award payment. The Committee may use negative discretion and adjust any annual incentive award payment downward, using any subjective or objective measures as it shall determine. The application of any reduction, and the methodology used in determining any such reduction, is in the sole discretion of the Committee.
With respect to annual incentive awards granted pursuant to the EICP, participants who retire during the year at age 65 pursuant to their employer’s bylaws remain eligible to receive an award. Subject to the Committee’s discretion, participants who terminate employment for other reasons are not eligible for an award, except that a prorated award may be paid to participants who transfer between their employer at the time the award is granted and MDU Resources Group, Inc. or any of its business segments, divisions or subsidiaries. The Committee has full discretion to determine the extent to which performance measures have been achieved, the payment level and whether any final payment will be made. Once performance measures are approved by the Committee for EICP awards, the Committee generally does not modify the measures. However, if major unforeseen changes in economic and environmental conditions or other significant factors beyond the control of management substantially affected management’s ability to achieve the specified performance targets, the Committee, in consultation with the chief executive officer, may modify the performance targets. Such modifications will only be considered in years of unusually adverse or favorable external conditions.

Payments are based upon achievement relative to established annual performance measures. The target incentive awards were established based upon the officers’ positions and base salaries as follows:
Name
Position
2016 Annual Incentive Target
(as % of Base Salary)
David L. Goodin
President and Chief Executive Officer
of the Company
100
Doran N. Schwartz
Vice President and Chief Financial Officer
of the Company
65
David C. Barney
President and Chief Executive Officer of construction materials and contracting segment
75
Jeffrey S. Thiede
President and Chief Executive Officer
of construction services segment
75



3


Payment will range (i) from zero to 240% of the target for Messrs. Barney and Thiede and (ii) from zero to 200% of the target for Messrs. Goodin and Schwartz based upon achievement of the performance measures. The 2016 performance measures and goal weightings are as follows:

Twenty percent (20%) of the annual incentive awards for the business segment leaders will be based on Company earnings per share (“EPS”), adjusted to exclude the (i) effect on earnings at the Company level of intersegment eliminations, (ii) income statement impact due to losses on asset sales or dispositions that are approved by the Board, (iii) effect on earnings of any noncash (unrealized) gains or losses that are the result of accounting for any hedging activity, and (iv) assessed withdrawal liabilities relating to multi-employer pension plans. Intersegment eliminations are intercompany balances and transactions that will be eliminated in consolidation (as will be reported in the notes to the Company’s financial statements for the fiscal year ending December 31, 2016), except for certain transactions related to the Company’s regulated operations in accordance with GAAP.

The 2016 award opportunity for Mr. Barney is:
Construction Materials & Contracting (“CMC”)
David C. Barney
Annual 2016 Performance Measures
 
Percent of CMC Target
Earnings Achieved
 
 
 
Percent of Payout
 
 
Less than 85%
 
 
 
0%
 
 
85%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
150%
 
 
 
200%
 
 
167.2%
 
 
 
250%
 
 
This component has a weight factor of 80%
 
 
Percent of MDU Resources
Diluted Adjusted EPS
Achieved
 
 
 
Percent of Payout
 
 
Less than 85%
 
 
 
0%
 
 
85%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
115%
 
 
 
200%
 
 
This component has a weight factor of 20%
 
For the purpose of calculating payouts, any achievement within the ranges noted on the above incentives will be determined by linear interpolation for payment.
CMC Earnings is defined as GAAP earnings reported for the segment, adjusted to exclude the (i) income statement impact due to losses on asset sales or dispositions that are approved by the Board and (ii) assessed withdrawal liabilities relating to multi-employer pension plans.


4



The 2016 award opportunity for Mr. Thiede is:
Construction Services (“CSG”)
Jeffrey S. Thiede
Annual 2016 Performance Measures
 
Percent of CSG Target
Earnings Achieved
 
 
 
Percent of Payout
 
 
Less than 80%
 
 
 
0%
 
 
80%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
150%
 
 
 
200%
 
 
210%
 
 
 
250%
 
 
This component has a weight factor of 80%
 
 
Percent of MDU Resources
Diluted Adjusted EPS
Achieved
 
 
 
Percent of Payout
 
 
Less than 85%
 
 
 
0%
 
 
85%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
115%
 
 
 
200%
 
 
This component has a weight factor of 20%
 
For the purpose of calculating payouts, any achievement within the ranges noted on the above incentives will be determined by linear interpolation for payment.
CSG Earnings is defined as GAAP earnings reported for the segment, adjusted to exclude the (i) income statement impact due to losses on asset sales or dispositions that are approved by the Board and (ii) assessed withdrawal liabilities relating to multi-employer pension plans.


5


The 2016 award opportunity available to the President and Chief Executive Officer of the pipeline and midstream segment and refining segment combined is:
Pipeline and Midstream, and Refining (“P&M and Refining”)
President and Chief Executive Officer
Annual 2016 Performance Measures
 
Percent of P&M Target
Earnings Achieved
 
 
 
Percent of Payout
 
 
Less than 85%
 
 
 
0%
 
 
85%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
115%
 
 
 
200%
 
 
This component has a weight factor of 28%
 
 
Percent of P&M Target
Return on Invested Capital
(ROIC) Achieved
 
 
 
Percent of Payout
 
 
Less than 85%
 
 
 
0%
 
 
85%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
115%
 
 
 
200%
 
 
This component has a weight factor of 28%
 
 
Percent of Refining
Optimum Refining
Production Achieved
 
 
 
Percent of Payout
 
 
Less than 75%
 
 
 
0%
 
 
75%
 
 
 
25%
 
 
85%
 
<--------- Target --------->
 
100%
 
 
95%
 
 
 
200%
 
 
This component has a weight factor of 24%
 
 
Percent of MDU Resources
Diluted Adjusted EPS
Achieved
 
 
 
Percent of Payout
 
 
Less than 85%
 
 
 
0%
 
 
85%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
115%
 
 
 
200%
 
 
This component has a weight factor of 20%
 
For the purpose of calculating payouts, any achievement within the ranges noted on the above incentives will be determined by lineal interpolation for payment.
P&M Earnings is defined as GAAP earnings adjusted to exclude the (i) income statement impact due to losses on asset sales or dispositions that are approved by the Board and (ii) effect on earnings of any noncash (unrealized) gains or losses that are the result of accounting for any hedging activity.


6


Optimum refining production is defined as barrels of production per day at plant design capacity less planned outages.
The 2016 award opportunity available to the President and Chief Executive Officer of the electric and natural gas distribution (utility) segment is:
`
Electric and Natural Gas Distribution (“Utility”)
President and Chief Executive Officer
Annual 2016 Performance Measures
 
Percent of Utility Target
Earnings Achieved
 
 
 
Percent of Payout
 
 
Less than 85%
 
 
 
0%
 
 
85%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
115%
 
 
 
200%
 
 
This component has a weight factor of 40%
 
 
Percent of Utility Target
Return on Invested Capital
(ROIC) Achieved
 
 
 
Percent of Payout
 
 
Less than 85%
 
 
 
0%
 
 
85%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
115%
 
 
 
200%
 
 
This component has a weight factor of 40%
 
 
Percent of MDU Resources
Diluted Adjusted EPS
Achieved
 
 
 
Percent of Payout
 
 
Less than 85%
 
 
 
0%
 
 
85%
 
 
 
25%
 
 
100%
 
<--------- Target --------->
 
100%
 
 
115%
 
 
 
200%
 
 
This component has a weight factor of 20%
 
For the purpose of calculating payouts, any achievement within the ranges noted on the above incentives will be determined by lineal interpolation for payment.

Utility Earnings is defined as GAAP earnings reported for the segment, adjusted to exclude the (i) income statement impact due to losses on asset sales or dispositions that are approved by the Board and (ii) assessed withdrawal liabilities relating to multi-employer pension plans.


7


The amount of annual incentive award earned, if any, for executives at the MDU Resources Group level, including Messrs. Goodin and Schwartz, will be determined based on the following formula:
Annual Incentive Award Earned = Payout Percentage X Target Award
The payout percentage will be the sum of the products that result from multiplying (x) the percentage of annual incentive target achieved based on the award opportunity for each of the Company's business segment leaders by (y) the business segment’s percentage of average invested capital. If the percent of payout for the earnings goal in the construction materials and contracting segment or the construction services segment should exceed 200%, the payment for the earnings goal for purposes of calculating the awards earned for executives at the MDU Resources Group level will be capped at 200%. The business segments are (i) construction materials and contracting, (ii) construction services, (iii) pipeline and midstream, and refining, combined, and (iv) electric and natural gas distribution (utility).
2016 Long-Term Incentive Awards
Revised Performance Share Award Agreement
On February 10, 2016, the Committee approved a revised Performance Share Award Agreement (the “Agreement”) to be used for future awards under the Long-Term Performance-Based Incentive Plan. The form of Agreement is filed as Exhibit 10.3 hereto and incorporated herein by reference.
The Agreement was revised to remove provisions relating to the disposition of Fidelity Exploration & Production Company as this is no longer a business segment.
No changes were made to percentile rank and payout percentages. Assuming the Company's three-year total stockholder return (“TSR”) is positive, from 0% to 200% of the target grant will be paid out, depending on the Company's TSR compared to the TSRs of companies in the Peer Group, as follows:
Percentile Rank
Payout Percentage
(% of Target Award)
75th or higher
200%
50th
100%
25th
20%
less than 25th
0%
If the Company achieves a percentile rank between the 25th and 50th percentiles, the payout percentage will be equal to 20%, plus 3.2% for each percentile rank whole percentage above the 25th percentile. If the Company achieves a percentile rank between the 50th and 75th percentiles, the payout percentage will be equal to 100%, plus 4.0% for each percentile rank whole percentage above the 50th percentile.


8


The Company will pay dividend equivalents in cash on the number of shares actually earned for the performance period. The dividend equivalents will be paid at the same time as the performance share awards are paid.
If the Company's TSR for the performance period is negative, the number of shares otherwise earned, if any, for the Performance Period will be reduced in accordance with the following table:
TSR
 
Reduction In Award
0% through -5%
 
50%
-5.01% through -10%
 
60%
-10.01% through -15%
 
70%
-15.01% through -20%
 
80%
 -20.01% through -25%
 
90%
-25.01% or below
 
100%

2016 Performance Share Awards
On February 10, 2016, the Committee established 2016 long-term incentive award opportunities in the form of performance shares with dividend equivalents for the executive officers including some of those officers who were the NEOs. The Board approved the award opportunities at its meeting on February 11, 2016. The 2016 long-term incentive award opportunities for the NEOs are set forth in the 2016 Performance Share Award Opportunity Chart, which is filed as Exhibit 10.4 and incorporated herein by reference.

Item 9.01    Financial Statements and Exhibits
 
(d)
 
Exhibits.
Exhibit Number
 
Description of Exhibit
10.1
 
MDU Resources Group, Inc. 2016 Annual Incentive Award Opportunity Chart
10.2
 
Form of Annual Incentive Award Agreement under the Long-Term Performance-Based Incentive Plan, as amended February 10, 2016
10.3
 
Form of Performance Share Award Agreement under the Long-Term Performance-Based Incentive Plan, as amended February 10, 2016
10.4
 
MDU Resources Group, Inc. 2016 Performance Share Award Opportunity Chart


9


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 18, 2016
 
 
 
 
 
MDU RESOURCES GROUP, INC.
 
 
 
By:
/s/ Doran N. Schwartz
 
 
Doran N. Schwartz
Vice President and
Chief Financial Officer



10


EXHIBIT INDEX
 
 
 
 
Exhibit Number
 
Description of Exhibit
10.1
 
MDU Resources Group, Inc. 2016 Annual Incentive Award Opportunity Chart
10.2
 
Form of Annual Incentive Award Agreement under the Long-Term Performance-Based Incentive Plan, as amended February 10, 2016
10.3
 
Form of Performance Share Award Agreement under the Long-Term Performance-Based Incentive Plan, as amended February 10, 2016
10.4
 
MDU Resources Group, Inc. 2016 Performance Share Award Opportunity Chart




11



Exhibit 10.1

MDU Resources Group, Inc.
2016 Annual Incentive Award Opportunity Chart
 
 
 
 
 
 
Name
Position
2016
Base
Salary
($)
Threshold
($)
Target
($)
Maximum
($)
David L. Goodin
President and Chief Executive Officer of the Company
755,000
188,750
755,000
1,510,000
Doran N. Schwartz
Vice President and Chief Financial Officer of the Company
380,000
61,750
247,000
494,000
David C. Barney
President and Chief Executive Officer of construction materials and contracting segment
406,800
76,275
305,100
732,240
Jeffrey S. Thiede
President and Chief Executive Officer of construction services segment
425,000
79,688
318,750
765,000
Patrick L. O'Bryan
President and Chief Executive Officer of E&P segment
450,000
—
—
—
Steven L. Bietz
Former President and Chief Executive Officer of pipeline and energy services segment
—
—
—
—







Exhibit 10.2

MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

ANNUAL INCENTIVE AWARD AGREEMENT

[Date]

[Name and Address]


In accordance with the terms of the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan (the "Plan"), pursuant to action of the Compensation Committee of the Board of Directors of MDU Resources Group, Inc. (the "Committee"), MDU Resources Group, Inc. (the "Company") hereby grants to you (the "Participant") an opportunity to receive an annual incentive award for calendar year 20[**] (the "Award"), subject to the terms and conditions set forth in this Award Agreement (including Annexes A and B hereto and all documents incorporated herein by reference), as set forth below:

Target Award:

$[**] (the "Target Award")

Performance Goals:

Described in Annex B

Performance Period:

January 1, 20[**] through December 31,
20[**] [one year] (the "Performance Period")

THE AWARD IS SUBJECT TO FORFEITURE AS PROVIDED HEREIN. THIS AWARD AND AMOUNTS RECEIVED IN CONNECTION WITH THIS AWARD ARE ALSO SUBJECT TO FORFEITURE, RECAPTURE OR OTHER ACTION IN THE EVENT OF AN ACCOUNTING RESTATEMENT, AS PROVIDED IN THE PLAN.
        
Further terms and conditions of the Award are set forth in Annexes A and B hereto, which are integral parts of this Award Agreement.






All terms, provisions and conditions applicable to the Award set forth in the Plan and not set forth in this Award Agreement are hereby incorporated herein by reference. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of the Plan will govern. The Participant hereby acknowledges receipt of a copy of this Award Agreement, including Annexes A and B hereto, and a copy of the Plan and agrees to be bound by all the terms and provisions hereof and thereof.
 
 
 
 
 
 
 
MDU RESOURCES GROUP, INC.
 
 
 
 
By:
 
 
 
Name
Title


Agreed :


 
Participant
 
Attachments:
Annex A
 
Annex B


2



ANNEX A

TO

MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

ANNUAL INCENTIVE AWARD AGREEMENT

It is understood and agreed that the Award evidenced by the Award Agreement to which this is annexed is subject to the following additional terms and conditions.

1. Nature of Award . The Award represents the opportunity to receive an annual incentive award if the Performance Goals are achieved during the Performance Period.

2. Determination of Annual Incentive Award Earned . The amount of the annual incentive award earned, if any, pursuant to this Award Agreement shall range from zero to [200] [240]% of the Target Award based upon achievement of the Performance Goals, with such percentage determined by the Committee in accordance with Annex B hereto.

3. Payment . Payment of any annual incentive award earned pursuant to this Agreement shall be made in cash in a lump sum. Unless the Participant has elected to defer receipt of the annual incentive award in accordance with an applicable deferral arrangement, payment will be made as soon as practicable (but not later than the next March 10th) following the Committee's certification of the achievement of the Performance Goals and determination of the Participant's annual incentive payment pursuant to Section 2 hereof.

4. Termination of Employment . Notwithstanding anything contained herein to the contrary, except as the Committee may otherwise determine, in order to be eligible to receive an annual incentive award under this Award Agreement, the Participant must remain in the employ of the Company through the Performance Period.

5. Discretion.

(a) No Positive Discretion . Unless otherwise determined and established in writing by the Committee within 90 days of the beginning of the Performance Period, no adjustment shall be made to the Performance Goals if the adjustment would increase the annual incentive award payment.


3



(b) Negative Discretion . The Committee may use negative discretion and adjust any annual incentive award payment downward, using any subjective or objective measures as it shall determine. The application of any reduction, and the methodology used in determining any such reduction, is in the sole discretion of the Committee.

6. Tax Withholding . The Committee shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy any Federal, state and local taxes (including the Participant's FICA obligations) required by law to be withheld with respect to the Award.

7. Ratification of Actions . By accepting the Award or other benefit under the Plan, the Participant and each person claiming under or through him or her shall be conclusively deemed to have indicated the Participant’s acceptance and ratification of, and consent to, any action taken under the Plan or the Award by the Company, its Board of Directors, or the Committee.

8. Notices . Any notice hereunder to the Company shall be addressed to its office, 1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506; Attention: Corporate Secretary, and any notice hereunder to the Participant shall be addressed to him or her at the address specified on the Award Agreement, subject to the right of either party to designate at any time hereafter in writing some other address.

9. Definitions . Capitalized terms not otherwise defined herein or in the Award Agreement shall have the meanings given them in the Plan.

10. Governing Law and Severability . To the extent not preempted by Federal law, the Award Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions. In the event any provision of the Award Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Award Agreement, and the Award Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.

11. No Rights to Continued Employment . This Award Agreement is not a contract of employment. Nothing in the Plan or in this Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate the Participant's employment at any time, for any reason or no reason, or confer upon the Participant the right to continue in the employ of the Company or a Subsidiary.



4



ANNEX B -- MDU Resources Group, Inc.

TO

MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

ANNUAL INCENTIVE AWARD AGREEMENT

Determination of Annual Incentive Award Earned and Performance Goals

Annual Incentive Award Earned

The amount of the annual incentive award earned, if any, for the Performance Period shall be determined in accordance with the following formula:

Annual Incentive Award Earned = Payout Percentage X Target Award

The Payout Percentage will be calculated as follows:

 
Column A
Percentage of Annual
Incentive Target Achieved (1)
Column B
Percentage of
Average Invested
Capital
Column A x Column B
Construction materials and contracting
[__]% (2)
[__]%
[__]%
Construction services
[__]% (2)
[__]%
[__]%
Pipeline and midstream, and refining combined
[__]%
[__]%
[__]%
Electric and natural gas distribution
(utility)
[__]%
[__]%
[__]%
Total (Payout Percentage)
 
 
[__]%

(1) Based on the award opportunity of the person who is the business segment leader.

(2) If the percent of payout for the earnings goal for these segments should exceed 200%, the payment for the earnings goal for purposes of calculating the awards earned at the MDU Resources Group level will be capped at 200%.

5




Performance Goals
The Performance Goals for [20**] for the (i) construction materials and contracting segment, (ii) construction services segment, (iii) pipeline and midstream segment and refining segment, combined, and (iv) electric and natural gas distribution (utility) segment are attached hereto.



6



ANNEX B – Business Segments

TO

MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

ANNUAL INCENTIVE AWARD AGREEMENT

[Attach Business Segments [20**] Approved Performance Goals]





7



Exhibit 10.3


MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT


[date]


«name»
«streetaddress»
«citystzip»

In accordance with the terms of the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan (the "Plan"), pursuant to action of the Compensation Committee of the Board of Directors of MDU Resources Group, Inc. (the "Committee"), MDU Resources Group, Inc. (the "Company") hereby grants to you (the "Participant") Performance Shares (the "Award"), subject to the terms and conditions set forth in this Award Agreement (including Annexes A and B hereto and all documents incorporated herein by reference), as set forth below:

Target Award:
«shares» Performance Shares (the "Target Award")
Performance Period:
 
January 1, 20** through December 31, 20**
[three years](the "Performance Period")
 
Date of Grant:
[**]
Dividend Equivalents:
Yes

THESE PERFORMANCE SHARES ARE SUBJECT TO FORFEITURE AS PROVIDED HEREIN. THIS AWARD AND AMOUNTS RECEIVED IN CONNECTION WITH THIS AWARD ARE ALSO SUBJECT TO FORFEITURE, RECAPTURE OR OTHER ACTION IN THE EVENT OF AN ACCOUNTING RESTATEMENT, AS PROVIDED IN THE PLAN.

Further terms and conditions of the Award are set forth in Annexes A and B hereto, which are integral parts of this Award Agreement.
 
 


1


All terms, provisions and conditions applicable to the Award set forth in the Plan and not set forth in this Award Agreement are hereby incorporated herein by reference. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of the Plan will govern. The Participant hereby acknowledges receipt of a copy of this Award Agreement, including Annexes A and B hereto, and a copy of the Plan and agrees to be bound by all the terms and provisions hereof and thereof.
 
 
 
MDU RESOURCES GROUP, INC.
 
 
 
 


 
 
By:
 
 
 
 
Name
 
 
 
Title
 
 
 
 
 
 
 
 
 


Agreed :



 
Participant
 
Attachments:
Annex A
 
Annex B



2


ANNEX A

TO

MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT

It is understood and agreed that the Award of Performance Shares evidenced by the Award Agreement to which this is annexed is subject to the following additional terms and conditions.

1.     Nature of Award . The Target Award represents the opportunity to receive shares of Company common stock, $1.00 par value ("Shares") and Dividend Equivalents on such Shares. The number of Shares that may be earned under this Award shall be determined pursuant to Section 2 hereof. The amount of Dividend Equivalents that may be earned under this Award shall be determined pursuant to Section 4 hereof. Except for Dividend Equivalents, which are paid in cash, Awards will be paid in Shares.

2.     Determination of Number of Shares Earned .

The number of Shares earned, if any, for the Performance Period shall be determined in accordance with the following formula:

# of Shares = Payout Percentage X Target Award

The "Payout Percentage" is based on the Company's total shareholder return ("TSR") relative to that of the Peer Group listed on Annex B (the "Percentile Rank") for the Performance Period, determined in accordance with the following table:

Percentile Rank
Payout Percentage
(% of Target Award)
75th or higher
200%
50th
100%
25th
20%
less than 25th
0%

If the Company achieves a Percentile Rank between the 25th and 50th percentiles, the Payout Percentage shall be equal to 20%, plus 3.2% for each Percentile Rank whole percentage above the 25th percentile. If the Company achieves a Percentile Ranking between the 50th and 75th percentiles, the Payout Percentage shall be equal to 100%, plus 4.0% for each Percentile Rank whole percentage above the 50th percentile.


3


If the Company’s TSR for the Performance Period is negative, the number of shares otherwise earned, if any, for the Performance Period will be reduced in accordance with the following table:

TSR
 
Reduction In Award
0% through -5%
 
50%
-5.01% through -10%
 
60%
-10.01% through -15%
 
70%
-15.01% through -20%
 
80%
-20.01% through -25%
 
90%
-25.01% or below
 
100%

The Percentile Rank of a given company's TSR is defined as the percentage of the Peer Group companies' returns falling at or below the given company's TSR. The formula for calculating the Percentile Rank follows:
Percentile Rank = (n - r + 1)/n x 100
 
Where:
 
n =
total number of companies in the Peer Group, including the Company
 
r =
the numeric rank of the Company's TSR relative to the Peer Group, where the highest
return in the group is ranked number 1
 
To illustrate, if the Company's TSR is the third highest in the Peer Group comprised of 20 companies, its Percentile Rank would be 90. The calculation is: (20 - 3 + 1)/20 x 100 = 90.
 
The Percentile Rank shall be rounded to the nearest whole percentage.

If the common stock of a company in the Peer Group ceases to be traded during the Performance Period, the company will be deleted from the Peer Group. Percentile Rank will be calculated without regard to the return of the deleted company.

If the Company or a company in the Peer Group spins off a segment of its business, the shares of the spun-off entity will be treated as a cash dividend that is reinvested in the Company or the company in the Peer Group.

Total shareholder return is the percentage change in the value of an investment in the common stock of a company from the initial investment made on the last trading day in the calendar year preceding the beginning of the performance period through the last trading day in the final year of the performance period. It is assumed that dividends are reinvested in additional shares of common stock at the frequency paid.

All Performance Shares that are not earned for the Performance Period shall be forfeited.


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3.     Issuance of Shares and Mandatory Holding Period . Subject to any restrictions on distributions of Shares under the Plan, and subject to Section 6 of this Annex A, the Shares earned under the Award, if any, shall be issued to the Participant as soon as practicable (but no later than the next March 10) following the close of the Performance Period. The Participant shall retain 50% of the net after-tax Shares that are earned under this Award until the earlier of (i) the end of the two-year period commencing on the date any Shares earned under this Award are issued and (ii) the Participant’s termination of employment.

4.     Dividend Equivalents . Dividend Equivalents shall be earned with respect to any Shares issued to the Participant pursuant to this Award. The amount of Dividend Equivalents earned shall be equal to the total dividends declared on a Share between the Date of Grant of this Award and the last day of the Performance Period, multiplied by the number of Shares issued to the Participant pursuant to the Award Agreement. Any Dividend Equivalents earned shall be paid in cash to the Participant when the Shares to which they relate are issued or as soon as practicable thereafter, but no later than the next March 10 following the close of the Performance Period. If the Award is forfeited or if no Shares are issued, no Dividend Equivalents shall be paid.
5.     Termination of Employment .
(a)    If the Participant's employment with the Company is terminated during the Performance Period (i) for "Cause" (as defined below) at any time or (ii) for any reason other than "Cause" before the Participant, as of the effective date of termination, has reached age 55 and completed 10 "Years of Service" (as defined below), all Performance Shares (and related Dividend Equivalents) shall be forfeited.
(b)    If the Participant's employment with the Company is terminated for any reason other than "Cause" after the Participant, as of the effective date of termination, has reached age 55 and completed 10 "Years of Service" (i) during the first year of the Performance Period, all Performance Shares (and related Dividend Equivalents) shall be forfeited; (ii) during the second year of the Performance Period, determination of the Company's Percentile Rank for the Performance Period will be made by the Committee at the end of the Performance Period, and Shares (and related Dividend Equivalents) earned, if any, will be paid based on the Payout Percentage, prorated for the number of full months elapsed from and including the month in which the Performance Period began to and including the month in which the termination of employment occurs; and (iii) during the third year of the Performance Period, determination of the Company's Percentile Rank for the Performance Period will be made by the Committee at the end of the Performance Period, and Shares (and related Dividend Equivalents) earned, if any, will be paid based on the Payout Percentage without prorating.

(c)    For purposes of the Award Agreement, the term "Cause" shall mean the Participant's fraud or dishonesty that has resulted or is likely to result in material economic damage to the Company or a Subsidiary, or the Participant's willful nonfeasance if such nonfeasance is not cured within ten days of written notice from the Company or a Subsidiary, as determined in good faith by a vote of at least two-thirds of the non-employee directors of the Company at a meeting of the Board at which the Participant is provided an opportunity to be heard. For purposes of the


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Award Agreement, the term "Years of Service" shall mean the years a Participant is employed by the Company and/or a Subsidiary.

6.     Tax Withholding . Pursuant to Article 16 of the Plan, the Committee shall have the power and the right to deduct or withhold, or require the Participant to remit to the Company, an amount sufficient to satisfy any Federal, state and local taxes (including the Participant's FICA obligations) required by law to be withheld with respect to the Award. The Committee may condition the delivery of Shares upon the Participant's satisfaction of such withholding obligations. The Participant may elect to satisfy all or part of such withholding requirement by tendering previously-owned Shares or by having the Company withhold Shares having a Fair Market Value equal to the minimum statutory withholding that could be imposed on the transaction (based on minimum statutory withholding rates for Federal, state and local tax purposes, as applicable, including payroll taxes, that are applicable to such supplemental taxable income). Such election shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

7.     Ratification of Actions . By accepting the Award or other benefit under the Plan, the Participant and each person claiming under or through him or her shall be conclusively deemed to have indicated the Participant's acceptance and ratification of, and consent to, any action taken under the Plan or the Award by the Company, its Board of Directors, or the Committee.

8.     Notices . Any notice hereunder to the Company shall be addressed to its office, 1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506; Attention: Corporate Secretary, and any notice hereunder to the Participant shall be addressed to him or her at the address specified on the Award Agreement, subject to the right of either party to designate at any time hereafter in writing some other address.

9.     Definitions . Capitalized terms not otherwise defined herein or in the Award Agreement shall have the meanings given them in the Plan.

10.     Governing Law and Severability . To the extent not preempted by Federal law, the Award Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of law provisions. In the event any provision of the Award Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Award Agreement, and the Award Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.
 
11.     No Rights to Continued Employment . The Award Agreement is not a contract of employment. Nothing in the Plan or in the Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate the Participant's employment at any time, for any reason or no reason, or confer upon the Participant the right to continue in the employ of the Company or a Subsidiary.


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ANNEX B

TO

MDU RESOURCES GROUP, INC.
LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN

PERFORMANCE SHARE AWARD AGREEMENT

PEER GROUP COMPANIES


ALLETE, Inc.
Alliant Energy Corporation
Atmos Energy Corporation
Avista Corporation
Black Hills Corporation
EMCOR Group, Inc.
Granite Construction Incorporated
IDACORP, Inc.
Integrated Electrical Services, Inc.
Martin Marietta Materials, Inc.
MYR Group Inc.
National Fuel Gas Company
Northwest Natural Gas Company
NorthWestern Corporation
Quanta Services, Inc.
Questar Corporation
Sterling Construction Company, Inc.
U.S. Concrete, Inc.
Vectren Corporation
Vulcan Materials Company


 


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Exhibit 10.4


MDU Resources Group, Inc.
2016 Performance Share Award Opportunity Chart

 
 
Threshold
Target
Maximum
Name
Title
Shares
 (#)
Dividend
Equivalents
($)
Shares
(#)
Dividend
Equivalents
($)
Shares
 (#)
Dividend
Equivalents
($)
David L. Goodin
President and Chief Executive Officer of the Company
19,753
44,444
98,764
222,219
197,528
444,438
Doran N. Schwartz
Vice President and Chief Financial Officer of the Company
3,977
8,948
19,883
44,737
39,766
89,474
David C. Barney
President and Chief Executive Officer of construction materials and contracting segment
3,784
8,514
18,920
42,570
37,840
85,140
Jeffrey S. Thiede
President and Chief Executive Officer of
construction services segment
3,953
8,894
19,767
44,476
39,534
88,952
Patrick O'Bryan
President and Chief Executive Officer of
E&P segment
—
—
—
—
—
—
Steven L. Bietz
Former President and Chief Executive Officer of pipeline and energy services segment
—
—
—
—
—
—